Survey: Businesses face rise in class action lawsuits

Attorney says a plan of action, quickly, is essential.

Few things can crush a company’s good fortune — and spirit — like being on the defendant side of a class action lawsuit.

Yet, unfortunately for business owners and executives, that sinking feeling has a good chance of increasing this year. “With the economy picking up,” says Carlton Fields attorney Julianna McCabe, “the amount of class actions have also picked up.”

That’s one highlight from the 2018 Carlton Fields Class Action Survey. Tampa-based Carlton Fields, with 10 offices nationally, from Miami to Los Angeles, annually produces the survey, which details how leading corporate legal departments identify, measure and manage class action risk. The 2018 survey was compiled from 411 interviews with general counsel, chief legal officers and direct reports to general counsel among a variety of companies. Survey participants’ companies, from more than 25 industries, had an average annual revenue of $13.9 billion, and median annual revenue of $5.9 billion.

After a drop in class action spending from 2011 to 2014, the situation has reversed, going up annually now since 2015, the report shows. Across all industries, companies spent $2.24 billion on class action lawsuits in 2017 — the highest in the seven years of the survey. The number of companies that faced class actions, meanwhile, climbed to 59%, up from 53.8% in 2016, the report adds.

More bad news for businesses: The average volume of class actions per company increased slightly, from 5.9 in 2016 to 6.3 in 2017, another all-time survey high. In addition, another jump in class action matters per company, to 6.7, is anticipated in 2018. Companies averaged 1.7 new class actions in 2017, and predict this number will rise to 3.1 in 2018.

It’s no coincidence, says McCabe, the firm’s national class actions practice group leader and head of the survey, that the rise in class action lawsuits comes in lockstep with the rebounding economy. “The plaintiffs bar is more well-financed” to fund class action lawsuits,” McCabe tells Coffee Talk.

Labor and employment matters remained the most common type of class action lawsuits, the report found, while there was a sharp rise in product liability and antitrust matters. The latter, points out McCabe, highlights another survey finding: companies express concern about the intersection between regulatory proceedings and class action litigation.

Despite the class action clouds, McCabe says there is hope for businesses. A key step is to not procrastinate in dealing with a class action lawsuit, no matter the merits. “As soon as you get a complaint in the door,” says McCabe, “you need to assess it on the facts.”